As the April 16 Filing Deadline Approaches in Uncertain Financial Times, Taxpayers Should Avoid a Very Costly Mistake

Apr 02, 2001, 01:00 ET from California Society of Enrolled Agents

    SACRAMENTO, Calif., April 2 /PRNewswire/ -- Recent stock market downturns
 point up one of the most important tax filing mistakes to avoid:  failing to
 file a tax return on time because of inability to pay the tax due.
     "Taxpayers who are feeling a financial pinch from stock prices or any
 other reason should file a return on time or request an automatic extension
 even if they can't pay the tax owed," says Sal Romo Jr., EA, president of the
 California Society of Enrolled Agents (CSEA).
     "The penalty for late filing is 20 times the penalty for late payment in
 installments," he explains.
     (Enrolled Agents are tax professionals licensed by the federal government
 to assist taxpayers with tax planning, preparation and representation.)
     Consider this example.  Taxpayer Leslie and taxpayer Jay both owe
 $4,000 with their year 2000 tax return. Neither taxpayer can pay the amount by
 April 16.
     Leslie files a tax return by April 16 with a request to pay the tax due in
 monthly installments.  Leslie will be subject to the late PAYMENT penalty.
 With a filed Installment Agreement Form 9465, the late payment penalty is
 one-quarter of one percent per month.
     One-quarter percent of $4,000 is $10.
     Taxpayer Jay does not file a return by April 16 because Jay cannot pay the
 $4,000 due.  In addition to the late payment penalty, Jay is subject to the
 late FILING penalty, which is five percent per month (up to a maximum of
 25 percent).
     Five percent of $4,000 is $200.
     "Obviously a penalty of $10 per month is much better than a penalty of
 $200 per month," Romo says.
     (Without an installment agreement, the late payment penalty is one-half of
 one percent.  Both the late filing and late payment penalties are in addition
 to interest charged by the IRS on the tax due.)
     For taxpayers who owe less than $25,000, requests for installment
 agreements generally are approved for payment of the balance due plus
 penalties and interest over a period of up to five years (if the taxpayer is
 current with all other taxes).
     "For people who just can't file by April 16, an extension is another way
 to avoid the late filing penalty," says Romo.
     A request to the IRS for a four-month extension of time to file a tax
 return (IRS Form 4868) will automatically be granted. Payment toward any tax
 due is not required for approval of the extension, but the tax liability must
 be properly estimated on the form.
     (Taxpayers in California who seek professional assistance with their tax
 situation can locate Enrolled Agents in their area by calling toll-free 800-
 829-7765 or on-line at www.csea.org.  Outside California, the Enrolled Agent
 referral number is 800-424-4339.)
 
 

SOURCE California Society of Enrolled Agents
    SACRAMENTO, Calif., April 2 /PRNewswire/ -- Recent stock market downturns
 point up one of the most important tax filing mistakes to avoid:  failing to
 file a tax return on time because of inability to pay the tax due.
     "Taxpayers who are feeling a financial pinch from stock prices or any
 other reason should file a return on time or request an automatic extension
 even if they can't pay the tax owed," says Sal Romo Jr., EA, president of the
 California Society of Enrolled Agents (CSEA).
     "The penalty for late filing is 20 times the penalty for late payment in
 installments," he explains.
     (Enrolled Agents are tax professionals licensed by the federal government
 to assist taxpayers with tax planning, preparation and representation.)
     Consider this example.  Taxpayer Leslie and taxpayer Jay both owe
 $4,000 with their year 2000 tax return. Neither taxpayer can pay the amount by
 April 16.
     Leslie files a tax return by April 16 with a request to pay the tax due in
 monthly installments.  Leslie will be subject to the late PAYMENT penalty.
 With a filed Installment Agreement Form 9465, the late payment penalty is
 one-quarter of one percent per month.
     One-quarter percent of $4,000 is $10.
     Taxpayer Jay does not file a return by April 16 because Jay cannot pay the
 $4,000 due.  In addition to the late payment penalty, Jay is subject to the
 late FILING penalty, which is five percent per month (up to a maximum of
 25 percent).
     Five percent of $4,000 is $200.
     "Obviously a penalty of $10 per month is much better than a penalty of
 $200 per month," Romo says.
     (Without an installment agreement, the late payment penalty is one-half of
 one percent.  Both the late filing and late payment penalties are in addition
 to interest charged by the IRS on the tax due.)
     For taxpayers who owe less than $25,000, requests for installment
 agreements generally are approved for payment of the balance due plus
 penalties and interest over a period of up to five years (if the taxpayer is
 current with all other taxes).
     "For people who just can't file by April 16, an extension is another way
 to avoid the late filing penalty," says Romo.
     A request to the IRS for a four-month extension of time to file a tax
 return (IRS Form 4868) will automatically be granted. Payment toward any tax
 due is not required for approval of the extension, but the tax liability must
 be properly estimated on the form.
     (Taxpayers in California who seek professional assistance with their tax
 situation can locate Enrolled Agents in their area by calling toll-free 800-
 829-7765 or on-line at www.csea.org.  Outside California, the Enrolled Agent
 referral number is 800-424-4339.)
 
 SOURCE  California Society of Enrolled Agents